Already a member?

Intel Report Crushes Semiconductor ETFs - Leveraged ETFs

Just when investors thought the worst in the American economy
was over, a number of blue chips have begun to warn on their
performance, casting a shadow over the near term future. The latest
American giant to warn was Intel (
INTC
), the chip producing colossus that thoroughly dominates the
market. The company warned that it would miss its previous forecast
thanks to weather problems in Thailand, taking the wind out of the
company's sails just a few days after the Santa Clara-based firm
hit its 52 week high in stock price.

The cause of the decline was largely due to the supply
disruption that resulted from some of the worst flooding that the
Southeast Asian country experienced in more than half a century.
This pushed exports sharply lower and set Intel back in terms of
hard disk drive inventories as some reports suggested that the
national output of this key computing component were down more than
52% from the year ago period (also see
ETFs Vs. Mutual Funds
).

Thanks to this, quarterly revenue is expected to be down close
to $1 billion from the previous forecast of $14.7 billion for the
quarter while non-GAAP gross margin is expected to decline by fifty
basis points, down to 65.5%. If this wasn't bad enough, reports
also seemed to suggest that the problem wouldn't be going away in
the next few weeks and that the situation could take months to
resolve. In fact, Intel went on to
report that it
"expects hard disk drive supply shortages to continue into the
first quarter, followed by a rebuilding of microprocessor
inventories as supplies of hard disk drives recover during the
first half of 2012". (read
Top Three Precious Metal Mining ETFs
)

Unsurprisingly, Intel shares were hard hit by the news as the
stock price fell by over 5% in mid-day Monday trading. This report
also had a pretty severe impact on the rest of the tech space
pushing a variety of ETFs down sharply on the news. The worst was
in the semiconductor ETF space and especially so in the following
four ETFs:

Like all HOLDRs, this product doesn't track an index but does
offer extremely concentrated exposure to its industry. In this
case, the fund allocates nearly 23% of its assets to Intel while
also giving Texas Instruments (
TXN
) and Applied Materials (
AMAT
) weights of 21% and 10%, respectively. This ensures that SMH
offers investors a highly-concentrated bet on large caps, meaning
that broad exposure will not be achieved but the underlying
securities will be extremely liquid.

The fund tracks the PHLX Semiconductor Sector Index offering
exposure to 31 companies in total. The fund gives its top weighting
to Intel, allocating 9.5% to the company. In addition to INTC,
other top weightings go to Texas Instruments and Taiwan
Semiconductor (
TSM
), giving the fund a slice of international exposure in the
semiconductor space (also read
Three Low Beta Sector ETFs
).

For a slightly larger and more spread out portfolio, XSD could
be the way to go as the product holds just over 50 securities in
total. This is done by tracking the S&P Semiconductor Select
Industry Index which represents the Semiconductor sub-industry
portion of the S&P Total Markets Index. The index also uses a
modified equal weighting system, ensuring that small caps aren't
forgotten. Unlike the first two funds on this list, XSD doesn't
give the top portion to Intel, instead allocating higher weightings
to NetLogic Microsystems (
NETL
) and Silicon Labs (
SLAB
).

For a slightly more 'active' approach in the industry, PSI could
be an intriguing choice. The fund tracks the Dynamic Semiconductors
Intellidex Index which is designed to provide exposure to the
semiconductor space by thoroughly evaluating companies based on a
variety of investment merit criteria, including fundamental growth,
stock valuation, investment timeliness and risk factors. Intel
makes up the second biggest allocation in this fund at 4.9%,
trailing only KLA-Tencor (
KLAC
) which makes up 5.2% of assets (also read
Three All-Star Leveraged ETFs
).

Please note that once you make your selection, it will apply to all future visits to NASDAQ.com.
If, at any time, you are interested in reverting to our default settings, please select Default Setting above.

If you have any questions or encounter any issues in changing your default settings, please email isfeedback@nasdaq.com.

Please confirm your selection:

You have selected to change your default setting for the Quote Search. This will now be your default target page;
unless you change your configuration again, or you delete your
cookies. Are you sure you want to change your settings?